MERRILL LYNCH
WORLD INCOME
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Quarterly Report
September 30, 1999
<PAGE>
MERRILL LYNCH WORLD INCOME FUND, INC.
Officers and Directors
Terry K. Glenn, President and Director
James H. Bodurtha, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Arthur Zeikel, Director
Adrian Churn, Senior Vice President
Vincent T. Lathbury III, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President and Treasurer
Robert Harris, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
<PAGE>
Merrill Lynch World Income Fund, Inc., September 30, 1999
DEAR SHAREHOLDER
The three-month and year-to-date periods ended September 30, 1999 witnessed
relatively strong US economic activity and a surprising rebound in Europe and
Asia (including long-dormant Japan). This worldwide expansion affected
fixed-income markets more severely than might seem warranted, primarily because
it was unexpected. The consensus outlook at year-end 1998 called for continued
weakness abroad. This seemed likely to impact US growth rates. The forecast
included generally slowing inflation, declining interest rates and weaker
corporate profits. Bond prices discounted an environment that appeared to be
ideal for fixed-income securities.
As the year progressed it became increasingly apparent that the consensus was
wrong. The focus in the financial markets shifted from deflation to inflation
and from falling interest rates to rising interest rates. Economists hastily
changed their forecasts. The Federal Reserve Board reversed its late 1999 policy
of monetary easing and turned restrictive, raising the Federal Funds rate twice
to slow economic growth. Long-term interest rates soared. This environment had a
favorable side for lower-quality bonds. Perceptions of credit risk in emerging
countries eased as their economies resumed growth. In addition, economically
sensitive industries such as paper, energy and metals experienced stronger
demand and improved pricing, thus easing credit concerns somewhat. As a result,
Merrill Lynch World Income Fund, Inc. posted total returns superior to most
higher-quality bonds for the year-to-date period ended September 30, 1999. For
the nine-month period, the Fund's Class A, Class B, Class C and Class D Shares
had total returns of +4.43%, +3.83%, +3.80% and +4.24%, respectively. For the
same period, the Credit Suisse First Boston (CSFB) Global High Yield Index, our
high-yield benchmark, had a total return of +1.17%.
The illiquidity that gripped the corporate bond markets in late 1998 eased in
1999 but remained more pronounced than has been the norm throughout much of the
1990s. A major reason would seem to be the decision made by Wall Street market
makers to reduce inventory exposure to corporate bonds. Firms were surprised by
the steep bond price markdowns in 1998 on securities held in inventory for
resale and sought to reduce this exposure. In addition, many firms closed
proprietary trading portfolios that focused on producing profits by buying
distressed securities at low prices. Thus, the support for high-yield issuers
that experienced credit problems diminished considerably. The result brought
much steeper declines in the price of bonds experiencing credit deterioration
and default.
The third quarter of 1999 reflected this weak environment. For the three-month
period ended September 30, 1999, the Fund's Class A, Class B, Class C and Class
D Shares had total returns of +0.88%, +0.52%, +0.51% and +0.65%, respectively.
This is compared to a +1.20% total return for the unmanaged Emerging Market Bond
Index (EMBI+), a benchmark for the Fund's emerging market holdings, for the same
period. The CSFB Global High Yield Index had a total return of -1.60% for the
September quarter. Throughout the quarter, liquidity was poor and the market
struggled to absorb a relatively heavy new-issue calendar.
Investment Outlook
The interest rate outlook hinges on the US economy. We believe the Federal
Reserve Board is committed to maintaining noninflationary growth and can be
counted on to tighten monetary policy until growth slows. In the short run, this
is negative for bonds. In the long run it is extremely positive, ensuring that
the United States will continue to experience low inflation and interest rates.
We believe that while interest rates will probably rise further in this
tightening cycle, most of the damage has been done.
At this time, both the high-yield and emerging markets are attractive relative
to Treasury bonds. Yield spreads are well above the historic norm. At September
30, 1999, the yield difference between the CSFB Global High Yield Index and US
Treasury issues of comparable maturity was 6.32% and the yield spread of the
EMBI+ was 10.98%. Overall credit quality is improving and even problem credits
appear to have declined more than is justified by the underlying fundamentals.
The macroeconomic outlook also appears generally favorable for the high-yield
market. Economic growth is occurring around the world, strengthening the demand
for goods and services, particularly commodities. We are seeing the effects of
this growth reflected in improved earnings and outlook for a number of companies
held in the Fund. We believe this improvement may continue. Problems are also
easing abroad as economic growth in emerging world countries resumes.
Portfolio Composition
We continue to believe that the high-yield and emerging markets offer
exceptional value. Therefore, we maintained the Fund's fully invested position.
As of September 30, 1999, the Fund's asset allocation was: US high- yield
securities, 50% of net assets; emerging market government issues, 30%; emerging
market corporate bonds, 10%; and European high-yield issues, 10%. All securities
are US dollar denominated.
High-Yield Investments
Our outlook remains optimistic, reflecting our view that underlying credit
fundamentals are gradually improving and that valuation is attractive. Overall
credit quality of the Fund's high-yield corporate bond holdings remains higher
than average, with BB-rated issues comprising 55.4% of the assets allocated to
the high-yield sector as compared to 28.8% of the CSFB Global High Yield Index.
Industries that we found attractive included energy, 4.2% of net assets;
communications, 8.3%; cable, 5.1%; gaming, 6.8%; and paper and packaging, 6.4%.
For the December quarter, we expect to substitute lower coupon discount issues
for par bonds in order to seek to increase total return potential. In addition,
we plan to modestly lower quality to seek to take advantage of weakness in
select B-rated issues.
Emerging Market Investments
We maintained our favorable intermediate-term outlook on emerging market bonds.
Our view is supported by the general improvement in world economic conditions,
recovering commodity prices and indications that economic recessions may be
milder than originally anticipated in many countries.
However, our positive outlook does not prevent short-term concerns that higher
international interest rates could delay emerging markets' economic recovery. We
believe there are some offsetting factors that may partly cushion this negative
impact. A prolonged period of rising interest rates is likely to originate, or
be accompanied by, higher economic activity in the United States and other
industrialized countries, implying higher demand for emerging markets
manufactured goods and higher commodity prices.
We are keeping a close watch on other short-term risks to our markets. In
particular, we are monitoring Brazil's fiscal austerity program, its compliance
with the International Monetary Fund's program and on its success in
establishing the long-term foun-dations for sound tax and social security
systems that could put an end to chronic fiscal extravagance.
Argentina's foreign exchange convertibility system will be tested with the
advent of a new presidential administration and by the sharp economic slowdown
and political pressures against needed fiscal and structural reforms.
Venezuela's new government has embarked on an ambitious process of overhauling
its political structures, but its strategy to overcome social problems and
domestic recession and its excessive dependence on oil revenues remains to be
articulated. In Mexico, short-term risks appear to be firmly under control,
given the country's solid export performance, signs of an incipient domestic
activity recovery, realized oil revenues in excess of its budgeted figures and
its contingent planning to ensure a smooth presidential transition into the year
2000.
In Conclusion
We appreciate your ongoing investment in Merrill Lynch World Income Fund, Inc.,
and we look forward to assisting you with your financial needs in the months and
years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Vinent T. Lathbury III
Vincent T. Lathbury III
Senior Vice President and
Portfolio Manager
November 12, 1999
2 & 3
<PAGE>
Merrill Lynch World Income Fund, Inc., September 30, 1999
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select Pricing (SM) System, which offers four pricing alternatives:
o Class A Shares incur a maximum initial sales charge (front-end load) of 4%
and bear no ongoing distribution or account maintenance fees. Class A
Shares are available only to eligible investors.
o Class B Shares are subject to a maximum contingent deferred sales charge
of 4% if redeemed during the first year, decreasing 1% each year
thereafter to 0% after the fourth year. In addition, Class B Shares are
subject to a distribution fee of 0.50% and an account maintenance fee of
0.25%. These shares automatically convert to Class D Shares after
approximately 10 years. (There is no initial sales charge for automatic
share conversions.)
o Class C Shares are subject to a distribution fee of 0.55% and an account
maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase.
o Class D Shares incur a maximum initial sales charge of 4% and an account
maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation of
future performance. Figures shown in the "Recent Performance Results" and
"Average Annual Total Return" tables assume reinvestment of all dividends
and capital gains distributions at net asset value on the payable date.
Investment return and principal value of shares will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
Dividends paid to each class of shares will vary because of the different
levels of account maintenance, distribution and transfer agency fees
applicable to each class, which are deducted from the income available to
be paid to shareholders.
Recent Performance Results*
<TABLE>
<CAPTION>
Ten Years/
3 Month 12 Month Since Inception Standardized
As of September 30, 1999 Total Return Total Return Total Return 30-Day Yield
=====================================================================================================
<S> <C> <C> <C> <C>
ML World Income Fund, Inc. Class A Shares +0.88% +7.58% +76.57% 10.22%
- -----------------------------------------------------------------------------------------------------
ML World Income Fund, Inc. Class B Shares +0.52 +6.75 +20.89 9.87
- -----------------------------------------------------------------------------------------------------
ML World Income Fund, Inc. Class C Shares +0.51 +6.69 + 3.27 9.81
- -----------------------------------------------------------------------------------------------------
ML World Income Fund, Inc. Class D Shares +0.65 +7.13 + 6.14 9.99
=====================================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are
based on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the payable date. The Fund's ten-year/since inception periods are
ten years for Class A Shares, from 11/18/91 for Class B Shares and from
10/21/94 for Class C & Class D Shares.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares+*
================================================================================
Year Ended 9/30/99 +7.58% +3.27%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/99 +1.59 +0.76
- --------------------------------------------------------------------------------
Ten Years Ended 9/30/99 +5.85 +5.42
- --------------------------------------------------------------------------------
+ Performance results for per share net asset value of Class A Shares prior
to November 18, 1991 are for the period when the Fund was closed-end.
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 9/30/99 +6.75% +2.82%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/99 +0.80 +0.80
- --------------------------------------------------------------------------------
Inception (11/18/91) through 9/30/99 +2.44 +2.44
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
4 years.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
Year Ended 9/30/99 +6.69% +5.71%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 9/30/99 +0.65 +0.65
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
1 year.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class D Shares*
================================================================================
Year Ended 9/30/99 +7.13% +2.85%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 9/30/99 +1.21 +0.38
- --------------------------------------------------------------------------------
* Maximum sales charge is 4%.
** Assuming maximum sales charge.
4 & 5
<PAGE>
Merrill Lynch World Income Fund, Inc., September 30, 1999
SCHEDULE OF INVESTMENTS (in US dollars)
<TABLE>
<CAPTION>
Percent of
AFRICA Industries Face Amount Fixed-Income Investments Value Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Nigeria Foreign US$ 1,750,000 Central Bank of Nigeria, 6.25% due 11/15/2020+ $ 1,023,750 0.4%
Government
Obligations
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in Nigeria 1,023,750 0.4
====================================================================================================================================
Shares Held Warrants
====================================================================================================================================
Nigeria Energy 1,750 Nigeria Oil (Warrants) (d) 0 0.0
--------------------------------------------------------------------------------------------------------------------
Total Warrants in Nigeria 0 0.0
====================================================================================================================================
Total Investments in African Securities
(Cost -- $1,091,872) 1,023,750 0.4
====================================================================================================================================
EUROPE Face Amount Fixed-Income Investments
====================================================================================================================================
Bulgaria Foreign Republic of Bulgaria:
Government US$ 2,300,000 Discount, Series A, 6.50% due 7/28/2024+ 1,581,250 0.6
Obligations 1,300,000 Front-Loaded Interest Rate Reduction Bonds,
Series A, 2.75% due 7/28/2012+ 815,750 0.3
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in Bulgaria 2,397,000 0.9
====================================================================================================================================
Luxembourg Wireless 10,000,000 Millicom International Cellular, 11.834%*
Communications -- due 6/01/2006 7,150,000 2.7
International
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in Luxembourg 7,150,000 2.7
====================================================================================================================================
Poland Telecommunications 2,750,000 TPSA Finance BV, 7.75% due 12/10/2008 2,670,937 1.0
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in Poland 2,670,937 1.0
====================================================================================================================================
Russia Foreign Russian Federation Bonds (Regulation S):
Government 3,725,000 11% due 7/24/2018 1,573,812 0.6
Obligations 2,000,000 12.75% due 6/24/2028 930,000 0.4
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in Russia 2,503,812 1.0
====================================================================================================================================
Turkey Foreign 1,550,000 Republic of Turkey, 12% due 12/15/2008 1,534,500 0.6
Government
Obligations
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in Turkey 1,534,500 0.6
====================================================================================================================================
United Kingdom Cable -- 5,000,000 TeleWest Communications PLC, 8.406%* due 4/15/2009 3,025,000 1.2
International
--------------------------------------------------------------------------------------------------------------------
Industrials 5,000,000 Energis PLC, 9.75% due 6/15/2009 5,100,000 1.9
--------------------------------------------------------------------------------------------------------------------
Telephony 5,000,000 RSL Communications PLC, 9.125% due 3/01/2008 4,275,000 1.6
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in the United Kingdom 12,400,000 4.7
====================================================================================================================================
Convertible Bonds
====================================================================================================================================
Ireland Dental Equipment & 500,000 Phoenix Shannon PLC, 9.50% due 11/01/2000 5,000 0.0
Supplies
--------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds in Ireland 5,000 0.0
====================================================================================================================================
Total Investments in European Securities
(Cost -- $31,083,368) 28,661,249 10.9
====================================================================================================================================
LATIN AMERICA Fixed-Income Investments
====================================================================================================================================
Argentina Cable -- 2,500,000 Cablevision SA, 13.75% due 5/01/2009 2,325,000 0.9
International
--------------------------------------------------------------------------------------------------------------------
Foreign Republic of Argentina:
Government 17,745,000 9.75% due 9/19/2027 14,817,075 5.6
Obligations 5,300,000 Par, 6% due 3/31/2023+ (e) 3,378,750 1.3
------------ ------
18,195,825 6.9
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in Argentina 20,520,825 7.8
====================================================================================================================================
Brazil Foreign Republic of Brazil:
Government 3,500,000 11.625% due 4/15/2004 3,290,000 1.3
Obligations 7,250,000 10.125% due 5/15/2027 5,401,250 2.1
12,251,620 `C', 6.909% due 4/15/2014+ (e) 7,657,262 2.9
3,750,000 DCB, 5.938% due 4/15/2012+ (e) 2,250,000 0.8
2,500,000 Discount, 5.875% due 4/15/2024 (e) 1,568,750 0.6
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in Brazil 20,167,262 7.7
====================================================================================================================================
Colombia Utilities 5,866,800 TransGas de Occidente SA, 9.79% due 11/01/2010 4,847,291 1.8
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in Colombia 4,847,291 1.8
====================================================================================================================================
Mexico Conglomerates 5,000,000 Dine, SA de CV, 8.75% due 10/15/2007 4,387,500 1.7
--------------------------------------------------------------------------------------------------------------------
Foreign United Mexican States:
Government 7,000,000 11.50% due 5/15/2026 7,708,750 2.9
Obligations 5,378,000 `W-A', Par, 6.25% due 12/31/2019 3,952,830 1.5
3,370,000 `W-B', Par, 6.25% due 12/31/2019 2,476,950 0.9
------------ ------
14,138,530 5.3
--------------------------------------------------------------------------------------------------------------------
Industrials 3,000,000 Petroleos Mexicanos, 9.50% due 9/15/2027 2,531,250 1.0
--------------------------------------------------------------------------------------------------------------------
Transportation 5,000,000 TFM, SA de CV, 13.896%* due 6/15/2009 2,700,000 1.0
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in Mexico 23,757,280 9.0
====================================================================================================================================
Panama Foreign 1,700,000 Panama, Front-Loaded Interest Rate Reduction Bonds,
Government 4% due 7/17/2014+ 1,215,500 0.4
Obligations 600,000 Republic of Panama, 8.875% due 9/30/2027 480,000 0.2
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in Panama 1,695,500 0.6
====================================================================================================================================
Peru Foreign 2,820,000 Republic of Peru, Front-Loaded Interest Rate
Government Reduction Bonds,3.75% due 3/07/2017+ 1,519,275 0.6
Obligations
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in Peru 1,519,275 0.6
====================================================================================================================================
</TABLE>
6 & 7
<PAGE>
Merrill Lynch World Income Fund, Inc., September 30, 1999
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
LATIN AMERICA Percent of
(concluded) Industries Face Amount Fixed-Income Investments Value Net Assets
====================================================================================================================================
Venezuela Foreign Republic of Venezuela:
Government US$ 8,550,000 9.25% due 9/15/2027 $ 5,621,625 2.2%
Obligations 2,833,320 DCB, 6.313% due 12/18/2007 (e) 2,178,115 0.8
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in Venezuela 7,799,740 3.0
====================================================================================================================================
Total Investments in Latin American Securities
(Cost -- $86,040,118) 80,307,173 30.5
====================================================================================================================================
NORTH AMERICA
====================================================================================================================================
Canada Paper 5,000,000 Doman Industries Limited, 8.75% due 3/15/2004 3,537,500 1.3
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in Canada 3,537,500 1.3
====================================================================================================================================
United States Airlines 5,000,000 USAir Inc., 10.375% due 3/01/2013 4,994,700 1.9
--------------------------------------------------------------------------------------------------------------------
Automotive 5,000,000 Federal-Mogul Company, 7.375% due 1/15/2006 4,626,340 1.8
--------------------------------------------------------------------------------------------------------------------
Cable Television 5,000,000 Century Communications Corporation, 9.50%
due 3/01/2005 4,975,000 1.9
--------------------------------------------------------------------------------------------------------------------
Chemicals 5,340,000 ISP Holdings Inc., 9.75% due 2/15/2002 5,326,650 2.0
--------------------------------------------------------------------------------------------------------------------
Communications 5,000,000 Impsat Corp., 12.375% due 6/15/2008 3,800,000 1.4
--------------------------------------------------------------------------------------------------------------------
Computer
Services -- 5,000,000 Hadco Corp., 9.50% due 6/15/2008 4,737,500 1.8
Electronics
--------------------------------------------------------------------------------------------------------------------
Consumer Services 5,000,000 Protection One Alarm Monitoring, 8.625%
due 1/15/2009 3,350,000 1.3
--------------------------------------------------------------------------------------------------------------------
Energy 5,000,000 Chesapeake Energy Corp., 8.50% due 3/15/2012 4,050,000 1.6
1,000,000 Devon Energy Corporation, 4.95% due 8/15/2008 982,500 0.4
5,000,000 Ocean Energy Inc., 8.375% due 7/01/2008 4,825,000 1.8
10,670,000 TransAmerican Energy Corp., 13.22%* due 6/15/2002 1,147,025 0.4
------------ ------
11,004,525 4.2
--------------------------------------------------------------------------------------------------------------------
Financial
Services 5,000,000 SB Treasury Company LLC, 9.40% due 12/29/2049 (c)(e) 5,100,000 1.9
--------------------------------------------------------------------------------------------------------------------
Gaming 10,000,000 GB Property Funding Corp., 10.875% due 1/15/2004 6,000,000 2.3
5,000,000 Harrah's Operating Co. Inc., 7.875% due 12/15/2005 4,775,000 1.8
Jazz Casino Co. LLC:
3,335,227 5.927% due 11/15/2009 (a) 2,034,488 0.8
315,000 Contingent Notes, due 11/15/2009 (b)(e) 0 0.0
5,000,000 Trump Atlantic City Associates/Funding Inc., 11.25%
due 5/01/2006 4,225,000 1.6
------------ ------
17,034,488 6.5
--------------------------------------------------------------------------------------------------------------------
Health Care 5,000,000 Columbia/HCA Healthcare Corp., 7.25% due 5/20/2008 4,375,800 1.7
5,000,000 Fresenius Medical Capital Trust I, 9% due 12/01/2006 4,912,500 1.9
5,000,000 Tenet Healthcare Corp., 8.125% due 12/01/2008 4,562,500 1.7
------------ ------
13,850,800 5.3
--------------------------------------------------------------------------------------------------------------------
Hotels 5,000,000 HMH Properties, Inc., 7.875% due 8/01/2008 4,462,500 1.7
--------------------------------------------------------------------------------------------------------------------
Internet
Transport 5,000,000 PSINet, Inc., 10% due 2/15/2005 4,781,250 1.8
--------------------------------------------------------------------------------------------------------------------
Oil Refineries 5,000,000 Eott Energy Partners LP, 11% due 10/01/2009 5,068,750 1.9
--------------------------------------------------------------------------------------------------------------------
Paper 5,000,000 Container Corporation of America, 9.75%
due 4/01/2003 5,112,500 1.9
--------------------------------------------------------------------------------------------------------------------
Printing &
Publishing 5,000,000 Primedia, Inc., 7.625% due 4/01/2008 4,675,000 1.8
--------------------------------------------------------------------------------------------------------------------
Supermarkets 5,000,000 Pueblo Xtra International Inc., 9.50% due 8/01/2003 4,250,000 1.6
--------------------------------------------------------------------------------------------------------------------
Telephony 5,000,000 Intermedia Communications Inc., 8.60% due 6/01/2008 4,287,500 1.6
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in the United States 111,437,503 42.3
====================================================================================================================================
Convertible Bonds
====================================================================================================================================
United States Banking & 400,000 BankAtlantic Bancorp, Inc., 5.625% due 12/01/2007 307,000 0.1
Financial
--------------------------------------------------------------------------------------------------------------------
Conglomerates 1,000,000 Thermo Fibertek Inc., 4.50% due 7/15/2004 833,750 0.3
--------------------------------------------------------------------------------------------------------------------
Environmental 1,063,000 Thermo TerraTech, Inc., 4.625% due 5/01/2003 935,440 0.4
--------------------------------------------------------------------------------------------------------------------
Instruments/
Scientific 500,000 ThermoQuest Corporation, 5% due 8/15/2000 484,375 0.2
--------------------------------------------------------------------------------------------------------------------
Medical Laser 2,000,000 Thermolase Corp., 4.375% due 8/05/2004 1,680,000 0.6
Systems
--------------------------------------------------------------------------------------------------------------------
Oil Drilling 1,000,000 Diamond Offshore Drilling, 3.75% due 2/15/2007 1,047,500 0.4
500,000 Parker Drilling Co., 5.50% due 8/01/2004 376,250 0.2
------------ ------
1,423,750 0.6
--------------------------------------------------------------------------------------------------------------------
Optical Equipment 1,430,000 Thermo Optek Inc., 5% due 10/15/2000 1,397,825 0.5
--------------------------------------------------------------------------------------------------------------------
Technology Data General Corp.:
750,000 6% due 5/15/2004 779,063 0.3
250,000 6% due 5/15/2004 258,438 0.1
------------ ------
1,037,501 0.4
--------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds in the United States 8,099,641 3.1
====================================================================================================================================
Convertible Preferred Stocks, Preferred Stocks,
Shares Held Common Stocks & Warrants
====================================================================================================================================
United States Broadcasting/
Cable 137,257 On Command Corporation 2,582,147 1.0
43,675 On Command Corporation (Warrants) (d) 278,428 0.1
------------ ------
2,860,575 1.1
--------------------------------------------------------------------------------------------------------------------
Conglomerates 105,000 Polyphase Corporation*** 72,188 0.0
52,500 Polyphase Corporation (Warrants)*** (d) 525 0.0
52,500 Polyphase Corporation (Warrants)*** (d) 2,100 0.0
------------ ------
74,813 0.0
--------------------------------------------------------------------------------------------------------------------
Containers 10,000 Owens-Illinois Inc., 4.75% 327,500 0.1
--------------------------------------------------------------------------------------------------------------------
</TABLE>
8 & 9
<PAGE>
Merrill Lynch World Income Fund, Inc., September 30, 1999
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<TABLE>
<CAPTION>
NORTH AMERICA Percent of
(concluded) Industries Face Amount Fixed-Income Investments Value Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
United States Energy TCR Holdings Corp., Conv. Pfd. (c):
(concluded) 25,172 (Class B) $ 1,510 0.0%
13,845 (Class C) 775 0.0
36,500 (Class D) 1,935 0.0
75,516 (Class E) 4,758 0.0
------------ ------
8,978 0.0
--------------------------------------------------------------------------------------------------------------------
Gaming 91,338 JCC Holding Company (Class A) 742,121 0.3
--------------------------------------------------------------------------------------------------------------------
Manufactured 10,000 Fleetwood Capital Trust, 6% 348,750 0.1
Housing
--------------------------------------------------------------------------------------------------------------------
Steel 50,000 Worthington Industries, Inc. (Convertible, Series
DECS into Rouge Steel Common Stock), 7.25% 343,750 0.1
--------------------------------------------------------------------------------------------------------------------
Utilities 18,232 Citizens Utilities Company (Class B) 206,250 0.1
30,000 Citizens Utilities Trust, 5% 1,492,500 0.6
------------ ------
1,698,750 0.7
--------------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks, Preferred Stocks,
Common Stocks & Warrants in the United States 6,405,237 2.4
====================================================================================================================================
Total Investments in North American Securities
(Cost -- $153,434,219) 129,479,881 49.1
====================================================================================================================================
PACIFIC BASIN/
ASIA Face Amount Fixed-Income Investments
====================================================================================================================================
China Transportation US$ 6,620,000 Cathay International Ltd., 13% due 4/15/2008 3,376,200 1.3
10,000,000 GS Superhighway Holdings, 9.875% due 8/15/2004 5,612,500 2.1
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in China 8,988,700 3.4
====================================================================================================================================
Indonesia Paper 5,000,000 Indah Kiat International Finance, 12.50% due 6/15/2006 3,325,000 1.3
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in Indonesia 3,325,000 1.3
====================================================================================================================================
Philippines Foreign 1,100,000 Republic of the Philippines, 9.875% due 1/15/2019 1,036,893 0.4
Government
Obligations
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in the Philippines 1,036,893 0.4
====================================================================================================================================
South Korea Foreign 3,330,000 Republic of Korea, 8.875% due 4/15/2008 3,434,992 1.3
Government
Obligations
--------------------------------------------------------------------------------------------------------------------
Total Fixed-Income Investments in South Korea 3,434,992 1.3
====================================================================================================================================
Total Investments in Pacific Basin/Asian Securities
(Cost -- $25,350,075) 16,785,585 6.4
====================================================================================================================================
SHORT-TERM
SECURITIES Issue
====================================================================================================================================
Commercial Paper** 7,215,000 General Motors Acceptance Corp., 5.69% due 10/01/1999 7,215,000 2.7
--------------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term Securities
(Cost -- $7,215,000) 7,215,000 2.7
====================================================================================================================================
Total Investments (Cost -- $304,214,652) 263,472,638 100.0
Short Sales (Proceeds -- $18,472)*** (3,094) 0.0
Other Assets Less Liabilities 22,288 0.0
------------ ------
Net Assets $263,491,832 100.0%
============ ======
====================================================================================================================================
Net Asset Value: Class A -- Based on net assets of $55,966,342 and
9,319,795 shares outstanding $ 6.01
============
Class B -- Based on net assets of $198,648,465 and
33,100,510 shares outstanding $ 6.00
============
Class C -- Based on net assets of $2,819,574 and
470,154 shares outstanding $ 6.00
============
Class D -- Based on net assets of $6,057,451 and
1,008,792 shares outstanding $ 6.00
============
====================================================================================================================================
</TABLE>
+ Brady Bonds are securities which have been issued to refinance commercial
bank loans and other debt. The risk associated with these instruments is
the amount of any uncollateralized principal or interest payments since
there is a high default rate of commercial bank loans by countries issuing
these securities.
(a) Represents a pay-in-kind security, which may pay interest/dividends in
additional face amount/shares.
(b) Represents an obligation by Jazz Casino Co. LLC to pay a semi-annual
amount to the Fund through 11/15/2009. The payments are based upon varying
interest rates and the amounts, which may be paid-in-kind, are contingent
upon the earnings before income taxes, depreciation and amortization of
Jazz Casino Co. LLC on a fiscal year basis.
(c) The security is a perpetual bond and has no definite maturity date.
(d) Warrants entitle the Fund to purchase a predetermined number of shares of
common stock and are non-income producing. The purchase price and number
of shares are subject to adjustment under certain conditions until the
expiration date.
(e) Floating rate note.
* Represents a zero coupon or step bond; the interest rate shown reflects
the effective yield at the time of purchase by the Fund.
** Commercial Paper is traded on a discount basis; the interest rate shown
reflects the discount rate paid at the time of purchase by the Fund.
*** Covered short sales entered into as of September 30, 1999 were as follows:
- --------------------------------------------------------------------------------
Shares Issue Value
- --------------------------------------------------------------------------------
4,500 Polyphase Corporation $(3,094)
- --------------------------------------------------------------------------------
Total (Proceeds -- $18,472) $(3,094)
=======
- --------------------------------------------------------------------------------
10 & 11
<PAGE>
This report is not authorized for use as an offer or a solicitation of an offer
to buy shars of the Fund unless accompanied or preceded by the Fund's current
prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
Merrill Lynch
World Income
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #10788-9/99
[RECYCLE LOGO] Printed on post-consumer recycled paper
